Wednesday, June 1st, 2016

Market sells off –Finally


Its been a great run for some bulls and all things equal, bears got their wish list completed today as they pushed the market down to the 50 day moving averages in the indexes. The year 2013 has been a great  year and very profitable one to some traders and the party continued upto now the 3 rd week  in January 2014. This sell off was widely expected, since we didn’t have anything in a longtime since October 2013 at least.

The market has been on a Fed induced exhilaration and looks like the reality is coming back. Weak data from China and other economic factors were cited as  contributing towards the market sell off, as they say. But it’s really good old fashioned profit taking in my opinion.

This was a major distribution day, just look at the red engulfing bar it created today. I would assume the selling has not stopped yet. The close below the 50 day MA on SPX is significant technically, and a bounce off  from the lows may come and than again the market may get sold off  near the 50 day line. The bears would be ready for a second round.

Along with the indexes, major stocks also took the tumble. GOOG sold off 36 points well below its 21 day MA. CMG was another great name that saw action below the 500 levels today. However AAPL stayed intact and survived the red day much better. NFLX also stayed at its gap, and didn’t budge, as no one wants to sell those recent gains. MA which is now post split 10:1 saw the worst day in a long time and dived almost 3 points which would be 30 points pre-split on the stock.

Expect next week more of the same. Once the selling stops , buyers would step in and take the market higher. The market direction is still up as per the moving averages and trendlines which are holding pretty well. This is not the start of bear market yet. The economy is much stronger and jobs situation is much better and the new Fed Chairman will be coming in pretty soon. All these factors should be taken into account before setting the clock on bear markets.

Stay tune we will  keep you updated. For now sidelines and CASH is the best position there is..

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